By Kevin Plumberg
HONG KONG (Reuters) - Oil rose above $116 a barrel onMonday, as a quarter of U.S. crude production was shutteredbecause of Hurricane Gustav, while Asian stocks were slammed byslumping technology shares.
European share market futures pointed to a lower open, withspecial attention on the bank industry after Commerzbank agreedto buy Dresdner Bank from Allianz in a $14.5 billion deal.
Hurricane Gustav was expected to strike land west of NewOrleans, on the Louisiana coast, only days after the sombreanniversary of Hurricane Katrina's devastation in 2005, thoughthe storm was not expected to strengthen significantly once itmade landfall.
South Korea's won fell sharply against the U.S. dollar asdealers panicked about the potential for foreign investors tobail out of their domestic debt investments because ofdeteriorating conditions in Asia's fourth-largest economy.
The dollar, meanwhile, rose broadly, extending last month'sbiggest rally in more than a decade, on the view the U.S.economy is likely to recover more quickly than other majoreconomies that are probably shrinking. The dollar's rally wasstriking since it took place with oil prices also rising, whichshowed the crude market's singular focus on Gustav.
"This is definitely a dangerous storm but I think most ofthe market is in a wait-and-see mode," said Gerard Burg, acommodities analyst at National Bank of Australia in Melbourne."Investors are a lot more cautious now given the generalbearish sentiments in the market."
The October U.S. light crude contract climbed 99 cents to$116.45 a barrel, though was only $5 from an August low. U.S.markets are closed on Monday for a holiday.
A 4.1 percent drop on South Korea's benchmark KOSPI stockindex to the lowest since March 2007 led the region lower.Shares of Samsung Electronics and LG Electronics were thebiggest drags on the index.
The Korean won lost about 2.5 percent to 1,116.00 perdollar, the weakest since November 2004, despite countlesstimes the Bank of Korea has defended its currency this year.
The country's markets entered September in a sombre moodgiven the unusually high amount of won-denominated bondsmaturing in September held by foreign investors. The fear isthat investors may take their money and walk, rather thanrolling over the debt.
"This is more to do with the market panicking about whatmay happen and also the market is increasingly convincedintervention cannot be as aggressive as it was in previousmonths. There's a perception the Bank of Korea is running outof ammunition," said David Mann, head of research, Korea andforeign exchange strategist with Standard Chartered in HongKong.
"The worst point will be over the next few weeks ratherthan the next few months," he said.
FUND REDEMPTIONS
Japan's Nikkei stock index finished the day down 1.8percent, with shares of electronics parts maker Kyocera theheaviest weight.
Stark comments about slowing global demand for technologyfrom the world's second-largest computer maker Dell, whichknocked U.S. stocks lower on Friday, dealt a blow to a sectorwhose valuations have been among the hardest hit by the bearmarket.
Outside of Japan, Asia-Pacific stocks fell almost 2.5percent to their lowest level since March 2007.
The Shanghai composite index in China tumbled 3.2 percenton pessimism about the outlook for corporate earnings,extending its year-to-date fall to just over 50 percent.
Investors last week pulled $7.6 billion (4.2 billionpounds) out of 17 of the 24 equity, sector and fixed incomegroups watched by EPFR Global, a Boston-based firm that tracks$10 trillion in assets. Financial sector funds were one of thefew that attracted new money.
All emerging market fund groups recorded outflows lastweek, with money leaving emerging market equity funds for the11th time in the last 12 weeks.
"Appetite for exposure to emerging markets has been erodedby a sharp correction in commodity prices during the thirdquarter of 2008, a string of downward revisions to economicgrowth forecasts and painfully high inflation rates in severalkey markets including Russia, India, South Africa andArgentina," the firm said in a research note released over theweekend.
The dollar strengthened against both major and emergingmarket currencies, ahead of a busy week of central bankmeetings, including the European Central Bank, the Bank ofEngland and the Reserve Bank of Australia.
The euro was down 0.4 percent at about $1.4640, on its wayto testing a six-month low around $1.4570 hit last week.
Sterling fell 0.5 percent to $1.8040 after ChancellorAlistair Darling told a newspaper the country's economicdownturn might turn out to be the worst in 60 years.
(Additional reporting by Fayen Wong in PERTH, editing byDhara Ranasinghe)
